VZCZCXRO3204
RR RUEHFL RUEHNP
DE RUEHRO #2478/01 3510756
ZNR UUUUU ZZH
R 170756Z DEC 07
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC 9566
INFO RUEHFL/AMCONSUL FLORENCE 2818
RUEHMIL/AMCONSUL MILAN 9158
RUEHNP/AMCONSUL NAPLES 2962
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ROME 002478 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO EEB/TPP/IPE URBAN 
PASS TO USTR WILSON, YANG 
PASS TO DEPT OF COMMERCE MCLAUGHLIN 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD IT
SUBJECT: GOI WELCOMES DIALOGUE WITH PHARMA INDUSTRY 
 
REF: SECSTATE 162295 
 
(SBU) 1.  SUMMARY:  Ministry of Economic Development Director 
General for Innovation and Competition Andrea Bianchi 
received our demarche on pharmaceutical reimbursements, noted 
USG concerns about the GOI's pharmaceutical reimbursement 
scheme, and vowed to find a solution to remove the potential 
for patent infringements.  Bianchi expressed a ready 
willingness to meet with pharmaceutical industry 
representatives to discuss pricing and related issues 
further.  In our discussion, he identified the pharmaceutical 
industry as a key sector for the Italian economy as it 
pursues domestic and foreign investment; innovation and R&D. 
To that end, Bianchi outlined new GOI tax incentives to 
encourage R&D.  END SUMMARY. 
 
(SBU) 2.  EmbOffs met Ministry for Economic Development 
Director General for Competition Bianchi on December 11.  He 
was sensitive to USG concerns about the threat the GOI's 
pharmaceutical reimbursement scheme poses to innovation 
(reftel), but explained that the plan aims to foster 
innovation by encouraging new drug entries to market rather 
than sustaining drugs nearing the end of their patent life. 
He also claimed that the payback scheme is more transparent 
than previous efforts to stabilize drug prices.  According to 
Bianchi, since the reimbursement scheme does not call for 
suddenly depressed prices once the GOI's pharmaceutical 
spending cap is reached, drug companies will not see a sudden 
drop in revenues they would need to report and explain to 
their headquarters.  Further, he held that (again) since 
prices do not drop suddenly, the reimbursement scheme does 
not encourage a parallel market in pharmaceutical purchasing 
by other EU countries once the GOI's spending cap is reached. 
 
 
(SBU) 3.  When informed about USG concern regarding the 
potential for generic drugs to be approved while patents for 
a branded drug are still in effect, Bianchi immediately 
responded that he was aware of the problem and was working to 
address it.  He stated that the Italian Patent and Trademark 
Office (which reports to Bianchi) was working with AIFA (the 
Italian pharmaceutical regulatory agency) to find a solution 
that ensured that the approval process for generic drugs 
includes a comprehensive review of current drug patents, thus 
avoiding the possibility that a generic drug could be 
approved while a brand patent is still in effect.  He 
expected the problem to be resolved soon, possibly "by year's 
end." 
 
(SBU) 4.  Bianchi expressed a willingness to discuss the 
pricing question and other issues with pharma industry 
representatives in the future.  He emphasized that the 
pharmaceutical industry is very important to the Italian 
economy.  One of GOI's goals is to increase investment in 
innovation and R&D in Italy, and they see the pharma industry 
as a strong example of an innovative industry. 
 
(U) 5.  Bianchi relayed a new GOI plan to provide tax 
incentives for investment in R&D, particularly in 
private-public sector research partnerships.  Both domestic 
and foreign companies can claim a 10 percent tax credit for 
2007 spending (applicable in 2008) for direct investment in 
internal research, plus an additional 15 percent credit for 
R&D conducted with public universities or public sector 
agencies (external research), up to a total value of Euro 1.5 
million per company.  In 2008 the external research credit 
will increase to 40 percent (internal will remain at 10 
percent), with the maximum deduction increased to Euro 5 
million per company.  The GOI estimates these credits will 
cost approximately Euro 600 million.  Bianchi said the EU has 
recently approved this proposal. 
 
(SBU) 6.  COMMENT:  Bianchi seems to be among the most 
forward-looking officials of the current GOI.  The tax 
incentives, while mainly directed at small- to medium-sized 
Italian enterprises, illustrate his Ministry's intention to 
foster economic growth through innovative, research-oriented 
sectors, instead of just heavy, labor-intensive industry 
(e.g., factories with physical products).  His willingness to 
engage with the pharma industry bodes well for pharmaceutical 
development here. 
 
(SBU) 7.  The Ministry of Economic Development's recent 
involvement in this issue provides a welcome counterbalance 
to the Ministries of Health and Finance, which are concerned 
 
ROME 00002478  002 OF 002 
 
 
almost exclusively with cost containment.  END COMMENT. 
BORG